Distressing News from Chicago's Bankruptcy Court

The Chicago Tribune reports that Sandra Butler, former courtroom deputy to Judge Jacqueline Cox (and before that to former Judge Ron Barliant), has been charged with attempted extortion for allegedly soliciting $500 from a debtor by promising to halt the sale of the debtor's house. The Tribune reports:

Butler had no power to influence the bankruptcy proceeding, but she acted otherwise, even pretending to call the debtor's bank to negotiate a more favorable repayment plan, according to an affidavit filed by FBI agent Kenneth Samuel.

According to the affidavit, Butler, talking into a phone earlier this month, "asserted that she knew [the debtor] very well" and that while the amount "is supposed to be 10 percent, that was all [he] had." Butler then led the debtor to her office, where she took the money, according to the affidavit.

Butler appeared Monday before U.S. Magistrate Judge Sidney Schenkier. She was allowed to remain free on a $4,500 bail, and a court date was set for Sept. 27.

Butler was employed by Ken Gardner, clerk of the U.S. Bankruptcy Court in Chicago, and was assigned to the courtroom of Judge Jacqueline P. Cox. Gardner said he fired Butler from the $69,000-a-year job Monday morning.

"I'm shocked this would occur in the courthouse," Gardner said. "I'm shocked this would occur with someone working for me."

Butler had worked for the clerk's office since 1985 and had been assigned to Cox's courtroom for about two years, Gardner said. Bankruptcy Court officials cooperated with the sting operation, according to the affidavit.

The FBI became suspicious of Butler in August 2002, when a debtor in a bankruptcy case told them Butler had asked for $5,000 to stop the sale of her home, according to Samuel's affidavit. The debtor in that case later learned the money wasn't used for that purpose and contacted the FBI.

In the sting operation, FBI officials filed a fake bankruptcy case, giving the debtor a false name, Stanley Kozubal, and listing his home as an address in Des Plaines. The bankruptcy filing said Kozubal owed $130,000 to a bank in Kentucky.

The undercover witness was wearing an audio and video recording device when he went to Butler's office at the beginning of the month, according to the affidavit. He said he was afraid to lose his home and asked Butler for help.

"Butler responded that she could `off the record' make some phone calls to try and stop the sale of his property," Samuel said in the affidavit. "Butler asked the [debtor] if he had any `funds today.'"

Officials in U.S. Atty. Patrick Fitzgerald's office would not elaborate on Samuel's affidavit. A federal defender representing Butler could not be reached for comment.

Our condolences to the Judges and staff at the Bankruptcy Court for this horrible and most undeserved news. Having practiced in a number of jurisdictions around the country, I can tell you that Chicago's bankruptcy court is among the most skilled, diverse, and efficient in the land. Its judges always afford great compassion, time, and respect to even the most indigent pro se debtor caught up in the upside-down world of consumer bankruptcy. How sad it is that this news, which clearly caught everyone from Chief Judge Eugene R. Wedoff on down by surprise, might detract from the Court's painstaking efforts to lead the way in fairly administering justice in today's very contentious and litigious bankruptcy environment.